Terms like digitization and disruption have become “buzzwords” of the recent past, with everybody associating different things with them. The question is whether technology trends or new developments (in addition to an ever-changing process) have led to the profound changes that the industry generally believes have occurred.
The answer is likely to be yes, even if the changes in question have occurred indirectly. The availability of a new technology alone does not necessarily have to mean that established players on the market are able to or keen on immediately using the increases in efficiency made possible by that technology. In many cases, it is competitors, starting with a lean organization from scratch and based on new concepts that have become feasible due to the emergence of new technologies, who begin to explore new customer segments, which drives the development of the wider industry.
Obviously, the stock market industry is no different here, if not exemplary. New players serve as an example of how the service is becoming the product. While the actual product – a security, an index, currency pairs or a derivative thereof – is already sufficiently standardised and established, certain product attributes introduced or changed properties relating to its tradability alter the quality of providing the service in such a way that this has become the decisive factor.
One of those factors is the unlimited trading hours launched by Spectrum Markets, which is a new trading venue for pan-European securitized derivatives, namely the Multilateral Trading Fund (MTF). The multilateral trading facility (MTF) is an invention of the European Union. It is a self-regulating financial trading exchange – or venue, as it is frequently called today. As an alternative to the traditional stock exchanges of New York, London, Frankfurt or Tokyo, the MTF is classed as an investment service, which makes it ideal for use by a market operator or investment firm. However, not every broker wants to change its operating schedule to 24/5 because of the inherent costs for that broker or simply because not all of their clients request the seamless trading opportunity. However, the multilateral trading facility essentially has a decisive advantage because it constitutes a strictly regulated and transparent exchange transaction, and its security is much higher than that of OTC (over the counter) transactions.
Additionally, modern MTFs, such as spectrum markets, also provide disciplinary and structural support for liquidity. That means, they contractually oblige their market makers to guarantee liquidity standards. Structurally, additional functions like ISIN passported to multiple European markets, add support for overall liquidity. The same happens with intraday issuance (which allow the issuer to replace the products issued in the trading venue in a few minutes), or the transaction itself and the market data are free. Such innovation generally supports trading very much and is particularly important in volatile times as it dynamically adapts supply to the given demand at any time – and it illustrates how the service has become the product.
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